Tort Reform Pays Off In Texas

February 28, 2000

By the end of this year, tort reform which curtailed unnecessary and costly lawsuits will have saved consumers and businesses in Texas $2.9 billion in insurance premiums since the law took effect in 1995.

  • More than half the savings, about $1.9 billion, benefited professionals such as doctors nurses, engineers and Texas businesses.
  • They were the most likely targets of lawsuit abuses prior to the reforms.
  • The largest single group of beneficiaries was Texas drivers, who paid $1.06 billion less in auto liability premiums because of tort reform.
  • The numbers are verified by actuaries at the Texas Insurance Department, which is charged with making sure tort reform savings are passed on to consumers.

Some critics have charged that insurers are pocketing tort reform savings rather than passing them onto consumers, but reform advocates dismiss the complaints for several reasons.

First, supporters say, simply because total premiums haven't gone down doesn't mean cost per unit hasn't dropped. If a family buys a second car, the total premium will rise even though the cost per car goes down.

Second, reform backers argue critics have ignored the state's huge economic growth, stimulated in part by tort reform. From 1995-98 the Texas economy grew 40 percent faster than the rest of the country. More families added second or third cars, more new businesses were begun and established businesses added more assets and expanded operations. For these reasons, more liability insurance was purchased, and total premiums paid rose.

Source: Jose Montemayor (Texas commissioner of insurance), "Tort Reform Critics Use Flawed Assumptions," Dallas Morning News, February 28, 2000.

 

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